Singapore’s economic growth probably slowed last quarter as the European debt crisis constrained exports while elevated inflation prompted the central bank to tighten policy.
Gross domestic product rose an annualized 0.6 percent in the three months through June from the previous quarter, less than the 10 percent pace in the period through March, according to the median of 14 estimates in a Bloomberg News survey. The report is due tomorrow.
Singapore may require a further moderation in its 5 percent inflation rate, the fastest in Southeast Asia after Vietnam, to give the island more scope to join a monetary stimulus drive stretching from Asia to Europe. South Korea unexpectedly cut interest rates for the first time in more than three years today, joining the European Central Bank, People’s Bank of China and Bank of England in loosening monetary policy this month.
“A modest slowdown may be welcome by the authorities, but the key here is that it’s modest,” said Matt Hildebrandt, a Singapore-based economist at JPMorgan Chase & Co. “Weaker growth means less tight labor markets and that should help soften price pressures over time.”
The Singapore dollar is the second-best performer among 11 most-traded Asian currencies tracked by Bloomberg, gaining about 2 percent against its U.S. counterpart this year. The island uses the exchange rate to manage inflation, saying in April it would allow faster gains to damp price pressures.
Singapore has shown a high degree of resilience to global financial shocks, despite the openness of its economy and dependence on global trade, Moody’s Investors Service said last month. Exports rose less than 4 percent in April and May from a year earlier, and contracted in May from the previous month.
Retail sales rose at a slower pace in April as spending at department stores eased and vehicle purchases fell. Private home sales in May slumped 32 percent from a month ago to their lowest this year.
The Monetary Authority of Singapore guides the local dollar against a basket of currencies within an undisclosed band and adjusts the pace of appreciation or depreciation by changing the slope, width and center of the band.
The city-state added fewer jobs than initially estimated in the first quarter, and the seasonally adjusted unemployment rate for the three months through March rose to 2.1 percent from 2 percent the previous quarter, a report showed last month.
China may report weakening growth tomorrow, according to a separate Bloomberg News survey, putting pressure on Premier Wen Jiabao to further ease the government’s crackdown on the property industry.
Asian economies will expand less than previously forecast this year, the Asian Development Bank said today. International Monetary Fund Managing Director Christine Lagarde said last week the lender’s new global growth forecast due this month will be lower than the previous one.
“Europe’s debt crisis is a global drag and growth numbers in Asia will continue to get hurt,” said Harvinder Sian, a London-based senior rates strategist and co-head of research for Europe at Royal Bank of Scotland Group Plc. It “opens up the opportunity” for more easing in the region, he said.
Located at the southern end of the 600-mile (965-kilometer) Malacca Strait and home to one of the world’s busiest container ports, the city-state is vulnerable to fluctuations in overseas demand for manufactured goods, even as the government has boosted financial services and tourism to reduce reliance on exports.
The economy probably expanded 2.3 percent from a year earlier in the second quarter, according to the median estimate of 18 economists surveyed by Bloomberg.